EY Ups India's FY26 GDP Forecast to 6.7%

Global consultancy EY has revised its forecast for India’s real GDP growth for FY2025-26 to 6.7%, up from its earlier estimate of 6.5%, driven by robust performance in the June quarter and recent goods and services tax (GST) reforms.

According to EY’s September edition of its Economy Watch report, India’s economy grew by a stronger-than-expected 7.8% in Q1 of FY26, comfortably outpacing the Reserve Bank of India’s (RBI) projection of 6.5% issued during the August monetary policy review.

"While domestic demand has received a boost from recent GST reforms, global uncertainties continue to weigh on India’s export outlook," said DK Srivastava, Chief Policy Advisor at EY India. "Despite these headwinds, we expect real GDP to grow at 6.7% in FY26."

Call for Trade Diversification

EY flagged India’s dependence on a narrow set of trade partners, particularly the United States and China, as a structural concern. The report urged policymakers to diversify both export markets and import sources, especially in the context of ongoing trade tensions and global supply chain disruptions.

"India may do well to widen its trade network, especially within BRICS and other emerging markets, to reduce overreliance on a few large economies," Srivastava noted.

GST 2.0: Boost for Key Sectors

The recent implementation of GST 2.0—featuring rate rationalisations at 5%, 18%, and a special 40% slab—is expected to benefit several high-employment sectors such as automobiles, health, textiles, and consumer electronics. The reform is also poised to support agriculture through reduced costs for inputs like fertilisers and machinery.

"The new GST rate structure translates into meaningful price cuts across various goods," said Srivastava. "This should stimulate demand, particularly in consumption-driven sectors, and eventually help recover any short-term revenue losses."

He added that sectors such as renewable energy could also see gains due to lower input costs, potentially aiding India's broader sustainability goals.

EY anticipates that increased consumer demand driven by lower post-tax prices will help offset the initial dip in government revenues, leading to a more balanced fiscal outcome over time.